Even the most novice traders know this: to win on the stock market, you need to be patient.
But in practice, it takes some time before you're able to wait...
How can patience be compared to art?
Art expresses itself in many different ways.
And if you think about it, you could almost say that Art is everywhere and not just in film, theater or painting.
For example, it is often said that cooking is an ArtAnd there's no doubt that the palets of the finest gourmets (and even our own) will agree with this statement.
It takes a certain skill to pull off a complicated dish and bring out its flavors.
Of course, such competence can only be acquired with a lot of practice.
Trading, patience works in much the same way.
You can be a model of patience in everyday life and then turn into some kind of impatient monster in front of your screen when you want to open a position.
But with practice, mastering patience will also give your trading "more flavour". less stress (or should I say anxiety, for some), a clearer mind, and a vastly improved ability to interpret graphs.
As a result, you're bound to make more profit...
Why is it so difficult to be patient in the stock market?
For some, learning to be patient in trading can be a living hell.
The desire to make a quick buck is often the direct cause of this problem.
The stock market is a great way to make money, and those who take the plunge want to double their income in just a few hours.
They take insane risks, are particularly aggressive in the way they tradeThey don't hesitate to try their luck with leverage x 3,000.
Of course, I'm exaggerating, but it's deliberate.
Create and manage an equity portfolio, it's a bit like maturing a good cheese, or letting a good wine age. You can't do just anything, and you should always wait for the right moment before tasting these gastronomic masterpieces (yes, we're talking a lot about cooking today...).
No estate owner would dream of launching his wine on the market. before the minimum time required under the pretext of making a profit.
So it's the same with the stock market: sometimes you have to wait several days (weeks? Months? ), before spotting a buying opportunity (or sell) on the stocks we're interested in.
So why rush into buying at the wrong time?
The cash position:
You know what a buy position is, what a sell position is, but perhaps you don't know what a cash position is.
It's very simple: is when you leave your money in your account while you wait for a signal.
Not because you're not there, not because you're afraid of losing, not because you don't know what to do, but because you're smart.
When the long-awaited signal finally arrives, all you have to do is open a position with the money you've been patiently saving, while many will have lost money trying to trade at any time.
Patience is an art, but this one can also make you a lot of money...
Français
Excellent article Sylvain!
It's so true that in the stock market, it's better to do nothing than anything at all. You have to be demanding about the prerequisites for taking a position in a stock.
Of course, the more demanding you are, the fewer opportunities you'll have to invest intelligently. That's why it's so important to develop the kind of patience that pays off in the long run.
Martin
Good morning,
it's true that patience is sorely tested on End Of Day stocks. Perhaps that's why intraday Forex trading is so successful.
But what's even harder is not to be in too much of a hurry to resell.
Personally, although I'm a total stranger to, and hermetically sealed from, anything remotely related to trading, I'm looking at patience over a much longer period than that mentioned in the article.
My investment horizon is mostly longer than 3 years. Insofar as I buy companies that are experiencing temporary problems or that the market is studiously ignoring, time is my ally, provided I trust it...
So true Étienne!
Time is truly a long-term investor's ally.
Too bad the average investor is too hasty and irrational. Unfortunately, he or she will never benefit from the enormous time advantage of a winning self-directed investor.
Martin
Hello Etinne,
unfortunately, the stock market is not a place where you can survive on confidence. Unfortunately. And, on the other hand, no one can predict 3-year trends, except in the case of growth stocks.
Michel,
I don't claim to be clairvoyant by any means, and yet I live very well with the way I invest....without investing in growth companies.
In my way of investing - and I haven't invented anything, others have been doing it better than me for several decades - time is of the essence, and that suits me just fine.
At a time when everything is moving so fast, I'm a fervent advocate of re-establishing a slightly more rational and coherent time scale for equity investment.
I invest in companies whose time scale, and therefore mine, is not the nanosecond, the day or even the month. What entrepreneur would be foolish enough to manage his business week after week, with no long-term vision?
Finally, if you don't have a modicum of confidence in yourself and in your investment choices, you won't be able to survive long in the stock market.
I believe that you have to be confident in yourself and be prodigiously unaware of everything that's going on around you, including opinions, benevolent or otherwise, in order to last in this world.
Etienne,
I totally agree that we should ignore the gesticulations around us and that companies have a longer-term horizon (although certain stock market ratios are increasingly considered to the detriment of the long term).
For me, quality stocks introduce a bullish bias, but, overall, they follow the same rules as other financial assets (oil, copper, corn, gold, indices). And, with technical analysis, you can trade at intervals as small as a minute.
When a share appreciates by 20% over one year, it will have traveled much further intraday. It is therefore possible, in the short term, to earn much more.
And the great thing is that you can use the same indicators!
So, of course, if we have 1 billion in the stock market, we won't do the same.
When I spoke of confidence, I was referring to the hope of a turnaround. With well-chosen indicators, you know when a turnaround is coming. I'd even go so far as to say that it's best to take an interest only in stocks that are rising, so that you're always riding an upward wave.
I think you're looking for rational reasons to invest. You don't have to. It's better to use what works. The tools that enable some individual traders to earn more than an engineer's salary in a day work with stocks. I don't see why we need to worry about income statements or balance sheets. Let's leave that to the accountants.
Once again, I place myself in the position of the reader who doesn't have 1 billion in the stock market.
I do look for rational reasons to invest in companies.
This suits me just fine, and I can guarantee that it works, not just for me, but for several hundred investors, and has done for a century.
It's all very well to earn a salary in a day, but how reproducible is such a technique over the long term?
When I say long-term, I mean in decades.
We can read a lot about trading, but in concrete terms, do you have any names of well-known investors who have achieved respectable performance over at least 15 or 20 years?
As far as fundamental analysis and value investing are concerned, I can quote you without searching nearly 20 names of investors (and these are only the well-known ones) who have made at least 15%/year for 20 years.
A blind monkey would have made money on the stock market in the last 5 years, so it's important to look at things over a longer period of time, precisely to avoid taking the easy way out and saying that this or that technique/strategy works.
Never forget that "it's when the sun goes down that you see those who bathe naked".
I don't know if this is the place to reopen a debate as old as the stock market about fundamental and technical analysis, but personally, I see myself as an entrepreneur-investor, I don't give a damn about trends, about anything that needs a Greek letter to exist, about any calculation that a primary school pupil can't do or that requires the use of complicated tools.
Everyone has to find their own path and what suits them best. For me, what's right is to open a balance sheet to know and understand whether I'm investing in straw or stone.
The most important thing for everyone is to get a good night's sleep...
Etienne, the written word has trouble (a lot of trouble) getting across the non-verbal, so know that my interventions are devoid of criticism and aggression or any other bad feeling. Your position is entirely respectable and what you say is well-founded. It's your vision of things and it's justified. But I'm teasing you to tickle the readers and make them want to go beyond appearances. You know, sometimes all it takes is a change of perspective to see things differently.
It's true that this is a very old debate: fundamental versus technical analysis. But it's a biased debate (and won by TA).
On the one hand, for the 20 (and more) investors who achieved 15% per year over 20 years, there is a survivor bias. How many failed? And if a monkey is that efficient, what are we to make of it? All the winners have gambled.
I say the debate is biased because readers aren't interested. Who wants to wait 20 years? And starting from what? 10,000 euros?
Not everyone is Warren Buffett.
I think you invest with fundamental analysis when you're managing a LARGE portfolio, because you can't do otherwise.
Next, the record holder for the fastest gains is, I believe, Dan Zanger, and that's with technical analysis (coupled with exceptional companies - over a period of time).
And there's nothing to stop you combining fundamental analysis (or rather, quality stocks) with technical analysis for the best of both.
On the other hand, what technical analysis can offer (I'm not saying it's easy - it's just never been easier) is to enable lots of people who don't have the level to read a balance sheet or an income statement, to make a living trading. It's not that difficult to follow two intersecting curves on a screen, you know :-).
Although I'm not a philanthropist, I do like to help people who want to get by. And I say, with hard work and self-sacrifice, a few 6th grade indicators can help them to maybe, one day, why not, make a living from trading. The hardest workers succeed. It's like in any human activity: with the same courses, some people have 18/20 in maths and others 3/20.
But I agree with you that investing in quality equities over the long term is more profitable than Livret A or life insurance. But less than real estate, at least for Monsieur Toulemonde who doesn't have the funds to invest so much.
Today, with little or no down payment, you can earn 1,000 euros a month with a property. You can do the same by investing in quality shares with such a small amount of capital.
But real estate is a lot of work: you have to look for properties, carry out work or have it carried out, find tenants and so on. Intraday trading takes time, but it's simpler.
And even if some people earn 120,000 euros some days, which is very exceptional, I think that many people would be satisfied with 200 euros. And the magic thing about trading is that all you have to do is increase your capital to earn more! Work as hard to earn more! Wow!
I find it more comforting than waiting 20 years. Not everyone has 500 euros to invest in the stock market.
A word about rationality in trading: when your indicators allow you to gain 80 pips on the Dax during the day, that's very rational. It's even mathematical.
And those 80 pips are 80 euros, 800 or 8000 or more. I know a lot of people who'd be happy with that :-).
Fundamental analysis is based on discounting the company's future earnings + the statements of management and auditors + a reading of the future...
TA is about facts: the action of prices and their fractal decomposition into cyclical components. We do the same thing with waves, and it's not too bad.
Except that trading is much simpler :-)...
Well, I hope I haven't upset you too much... I like to take the counterpoint 🙂 🙂
First of all Michel, I never said you had to wait 20 years to make money. The most important thing is not to lose any!
I mentioned such a long time horizon to highlight the reproducibility of an investment method that will keep us alive in 20 years' time.
Finally, every day I meet people who are interested, who have modest means and who want to learn and progress through value investing. And that's not virtual.
"Fundamental analysis is based on discounting the company's future earnings + what the management and auditors say + a reading of the future..."
That's one way of looking at it, but it's not necessarily the truth, or at least it's not totally how I proceed.
Let's leave the fortune-telling to the fortune-tellers.
"TA is about facts: the action of prices and their fractal decomposition into cyclical components. We do the same thing with airwaves and, my goodness, it doesn't work too badly."
You'll allow me to question that last sentence. For me, what's factual is the bottle of Coke in my fridge, the iPhone in my wife's handbag, my insurance policy with Axa and the Louis Vuitton handbag we bought for Grandma.
Behind them, companies, entrepreneurs, employees and investors.
In the real world, that of entrepreneurship (the stock market being no more than a place for exchanging a fraction of a company's capital), every day entrepreneur-investors buy or sell other companies, subsidiaries, assets and holdings based on fundamental analysis and, above all, common sense.
To be able to put a value on a business and buy it at a much lower price: that's just good farming sense, and that's as far as it goes.
It's what everyone does during the sales, nothing more, nothing less. We haven't invented anything.
No matter what anyone says, hard work is necessary in all types of investment (stock market, real estate). To believe that you can succeed without doing anything is utopian and, above all, dangerous.
Don't worry Michel, I'm not frustrated or upset. Fortunately, we live in a democracy and everyone is free to think as they please.
The most important thing is for everyone to act in accordance with themselves and sleep soundly.
Hello Etienne,
I too admire entrepreneurs (not all of them - some would sell their parents), but we only talk about the successful ones. There are thousands of them, especially in France, who are falling by the wayside. As for the practices of big business...
I've had my Financial Analysis period myself (I've got diplomas) and I have to admit that discovering Nasdaq companies has a slightly exotic flavour. It's hard to analyze a company's business on your own, unless you look into the past and say "it'll be the same in the future". But I do concede that the quality of some companies' business models makes them champions.
However, in the short term, AT is very effective. And when you combine AT and AF, it's even better.
As for good farming sense, I totally agree with you. What I'm also saying is that TA also enables us to select the best actions, more quickly.
Take Montupet. Fundamentally, I don't know what it's worth. However, from the end of 2012 to mid-2014 it rose by around 700%. Throughout this period there were indicators showing this trend, its beginning and its end. I haven't taken any even bigger American examples. Just a little French one.
I'm not saying you can get in before it starts, but once the trend is established, you follow it. And if, in addition, you do it on all the current trends, you're surfing the trends.
I'm not saying it's easy or labor-free or that anyone can do it, but one thing's for sure: everyone can have these tools. Which wasn't true 20 years ago.
Good evening !
Well, you've hit the nail on the head with Montupet. This is a typical company that has been (or rather, was) on the radar of value investors in recent years.
In fact, the entire automotive equipment sector has been a gold mine in recent years.
For the record, even if I don't personally agree, a recent value study on the performance of different strategies shows that the best performances are achieved by combining relative strength over 6 months (technical analysis) + discount on net book value (price-to-book, fundamental analysis).
The loop is complete....
It would be interesting to know why you don't believe in TA. Beliefs, values, bad experience in this field?
It's extremely simple, Michel.
Above all, it's a question of values...and good farming sense.
1) I invest in companies, and that's as far as it goes. Also, if the stock market were closed for 6 months, it wouldn't bother me too much.
For me, a share isn't a piece of paper or a chart, it's a form of ownership, a part of a company's capital (which is the correct definition of a share).
2) Buying a €1 ticket for 50 cents is explicit enough for me not to have to look any further.
This way of investing makes sense, it works and I back it very well. What else?
Knowing how to wait....
According to an economist's article in http://www.letemps.ch his conclusion was that, given the uncertainty of the markets, you should wait before making any stock market transactions, as the future is very uncertain. and even withdraw the money from your bank accounts, and keep the cash at home ....
This conclusion was motivated by the fact that interest earned on savings accounts at various banks was often less than the fees deducted, especially if you had an in-house credit card.
For example, for an investment of CHF 25,000.
http://www.comparis.ch has drawn up a comparison on this subject that can be read online
Some good deals too: Total with interest and fees
Gains of a few francs at POSTFINANCE , Banque MIGROS ,
COOP , RAIFFEISEN under certain conditions - and you will be a debtor at ZKB , UBS and Credit Suisse ....
I'll talk about it in my next article... 😉
It's true that leaving your money in savings accounts is stupid (and I'm stupid too :-)). Keeping money at home isn't a good idea either. Better to invest in real estate.
Dear Michel and Étienne, reading your exchange from beginning to end reveals the only certainty I know about successful investors/traders: they are independent-minded and firmly believe in their investment method.
And you know what, that's just fine. There's room for everyone in the wonderful world of the stock market.
Good luck, gentlemen...
Martin
Martin, the great thing about the stock market is that anyone can create their own method. There's room for everyone, especially with quality stocks. After all, it's reassuring to play on stocks that almost always rise on average.